Almost too much has happened this week for me to fully comprehend. But if there is one common theme, it is that the lunatics appear to have taken over the asylum. So much so, that I may well have to institute a Muppet of the week prize.
In the UK, we have had the shocker(!) of unexpectedly high inflation data, a poorly received gilt auction and an apparent spat between the governor of the Bank of England and the prime minister over economic policy. In the US, Treasury secretary Timothy Geithner had barely even got his laurels on, let alone rested on them, when he spoilt it all by putting his foot firmly in his mouth; the result was a nice bout of FX volatility. Elsewhere, those fine bodies the IASB and FASB, which tell the world how they should account for things like options, have decided that they will need to change their mark-to-market requirements. It seems like only yesterday that the imposition of FAS133 and IAS39 caused carnage in the FX options markets and effectively prevented many companies from using the best tools to manage their FX risk – possibly the biggest financial scandal for many years.